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Discharge from bankruptcy

Published Wednesday, May 1, 2019

The purpose of this note is to provide an overview of the discharge from bankruptcy procedure. In the process, it also considers the effect of discharge; the circumstances which may cause automatic discharge to be postponed by the court; and when a Bankruptcy Restrictions Order may be imposed.

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Discharge from bankruptcy is a legal term used to describe the process that frees a person from the restrictions of bankruptcy and releases them from most of the debts they owed at the date of the bankruptcy order.

A bankrupt will usually be automatically discharged 12 months after the date of the bankruptcy order, even if no payments have yet been made to creditors. After discharge, the bankrupt is released from all bankruptcy debts and any property he acquires after his discharge is his; the official receiver (or trustee in bankruptcy) cannot lay claim to it. However, property comprised in his estate at the time of the bankruptcy order remains under the control of the official receiver to be sold for the benefit of the creditors.

The official receiver (or trustee) may apply to the court for an order to stop automatic discharge from bankruptcy taking place. This is called "suspension of discharge". The official receiver might do this in circumstances where the bankrupt has refused to provide information or otherwise not fully co-operated with him. Alternatively, the official receiver may apply to the court for a Bankruptcy Restrictions Order or accept a Bankruptcy Restrictions Undertaking. In either case, the bankrupt will continue to be subject to restrictions for the period stated on the order or undertaking (usually between two and fifteen years). The official receiver might do this in cases where the bankrupt has abused the system or whose conduct has been ‘dishonest, reckless or otherwise culpable’. However, a Bankruptcy Restrictions Order or Undertaking will not affect the discharge of the bankrupt’s debts.

The purpose of this note is to provide an overview of the discharge from bankruptcy procedure. In the process, it also considers the effect of discharge; the circumstances which may cause automatic discharge to be postponed by the court; and when a Bankruptcy Restrictions Order may be imposed.

Commons Briefing papers SN03043

Author: Lorraine Conway

Topic: Insolvency

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